"An Objective of Firms Is to Maximize Profits

question 39

Multiple Choice

"An objective of firms is to maximize profits." This statement

• A)has been proven by empirical testing to be always true.
• B)is an assumption used by economists to predict the behaviour of firms.
• C)is a normative statement and thus cannot be tested.
• D)applies only to corporations.
• E)is an unrealistic assumption,and therefore of little use to economists.

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Definitions:

Indifference Map

A graphical representation in microeconomic theory of a consumer's preferences, showing different combinations of goods among which the consumer is indifferent.

Total Utility

The complete pleasure or advantage an individual obtains from the consumption of a specific amount of products or services.

Budget Line

A graphical representation of all possible combinations of two goods that an individual can afford, given their income and the prices of the goods.

Money Income

The overall sum of financial income earned by a person or family, comprising earnings from employment, salaries, and various other income types.